UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549







AMENDMENT NO. 1


TO


FORM 10-Q





x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended February 28, 2011













o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ______to______.





Zhong Sen International Tea Company(Exact name of registrant as specified in the Charter)








Florida

000-54163

26-2091212(State or other jurisdiction of

incorporation or organization)

(Commission File No.)

(IRS Employee Identification No.)





14th Floor Guo Fang Building


No.68 Wu Yi Road


Kunming City, Yunnan Province


P. R. China (Address of Principal Executive Offices)





(954) 247-4832


(Issuer Telephone number)





(Former Name or Former Address if Changed Since Last Report)





Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.


Yes x       No o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes o        No o





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):





Large Accelerated Filer   o
Accelerated Filer   o
Non-Accelerated Filer   o
Smaller Reporting Company   x





Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.


Yes o         No  x





State the number of shares outstanding of each of the issuer’s classes of common equity, as of April 13, 2011:  60,000,000 shares of common stock.










EXPLANATORY NOTE





This Amendment No. 1 to the Periodic Report on Form 10-Q (this “Amendment”) of Zhong Sen International Tea Co. (the “Company”), amends the Company’s Quarter Report on Form 10-Q for the quarter ended February 28, 2011 (the “Form 10-Q”), which was filed with the Securities and Exchange Commission (the “SEC”) on April 14, 2011.  The purpose of this Amendment is to include (a) revised footnotes to the financial statements to disclose certain significant accounting policies, and to disclose additional information in connection to the sales and marketing agreement with related party; and (b) a revised “Evaluation of Disclosure Controls and Procedures”, “Management’s Annual Report on Internal Control over Financial Reporting” and “Changes in Internal Control over Financial Reporting” to disclose the significant deficiencies on our internal control over financial reporting and remedies we have adopted to mitigate the foregoing material weakness.





Except as stated herein, this Amendment does not reflect any subsequent events occurred after the original filing of the Form 10-Q.





In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our principal executive officer and principal financial officer are filed as exhibits to this Amendment.





2




Item 1.      Financial Statements





ZHONG SEN INTERNATIONAL TEA COMPANYCONDENSED BALANCE SHEETSASSETSFebruary 28, 2011


May 31, 2010(Unaudited)CURRENT ASSETSCash

$
265


$
1,431Accounts receivable - realated party (Net of reserve for bad debts of $0, and $0 respectively)


64,640



28,30064,905



29,731Marketing agreement


120,000



120,000TOTAL ASSETS

$
184,905


$
149,731LIABILITIES AND STOCKHOLDERS’ EQUITYCURRENT LIABILITIESAccounts payable

$
65,330


$
5,800TOTAL LIABILITIES


65,330



5,800COMMITMENTS AND CONTINGENCIES


-



-.



.STOCKHOLDERS’ EQUITYCommon stock, $0.001 par value, 100,000,000 shares authorized,  60,000,000 and 60,000,000 shares issued and outstanding, respectively


60,000



60,000Additional paid in capital


633,194



631,694Accumulated deficit


(573,619
)


(547,763
)Total Stockholders’ Equity


119,575



143,931TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
184,905


$
149,731





See Accompanying Notes to the Condensed Unaudited Financial Statements




3




ZHONG SEN INTERNATIONAL TEA COMPANYCONDENSED STATEMENTS OF OPERATIONS(Unaudited)For the Three Months Ended February 28,


For the Nine Months Ended February 30,2011


2010


2011


2010REVENUES:Marketing revenue

$
35,159


$
38,957


$
105,402


$
111,44335,159



38,957



105,402



111,443OPERATING EXPENSESOfficer's compensation


500



500



1,500



1,500Professional fees


3,566



3,838



16,083



18,393Consulting fees


30,000



30,000



90,000



90,000General and administrative


20,688



1,064



23,675



3,662Total Operating Expenses


54,754



35,402



131,258



113,555NET INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES


(19,595
)


3,555



(25,856
)


(2,112
)PROVISION FOR INCOME TAXES


-



-



-



-NET INCOME (LOSS)

$
(19,595
)

$
3,555


$
(25,856
)

$
(2,112
)Net income (loss) per share - basic and diluted

$
(0.00
)

$
0.00


$
(0.00
)

$
(0.00
)Weighted average number of shares outstanding during the period - basic and diluted


60,000,000



60,000,000



60,000,000



60,000,000





See Accompanying Notes to the Condensed Unaudited Financial Statements





4





ZHONG SEN INTERNATIONAL TEA COMPANYCONDENSED STATEMENTS OF CASH FLOWS(Unaudited)For the nine months ended February 28,2011


2010CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(25,856
)

$
(2,112
)Adjustments to reconcile net loss to net cash used in operating activities:Imputed compensation


1,500



1,500Changes in operating assets and liabilities:Decrease / (increase) in accounts receivable


(36,340
)


(4,007
)(Decrese) Increase in accounts payable


59,530



(294
)Net Cash Used In Operating Activities


(1,166
)


(4,913
)NET DECREASE IN CASH


(1,166
)


(4,913
)CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


1,431



16,942CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
265


$
12,029Cash paid for interest

$
-


$
-Cash paid for taxes

$
-


$
-





See Accompanying Notes to the Condensed Unaudited Financial Statements





5





ZHONG SEN INTERNATIONAL TEA COMPANY


NOTES TO THE FINANCIAL STATEMENTS


AS OF FEBRUARY 28, 2011 AND 2010


(UNAUDITED)





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION





Basis of Presentation





The accompanying unaudited condensed financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and item 310 under subpart A of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the three and nine months ended February 28, 2011 are not necessarily indicative of results that may be expected for the year ending May 31, 2011. The financial statements are presented on the accrual basis.




Organization




Zhong Sen International Tea Company (“The Company”) was incorporated on January 30, 2008, in the State of Florida. The Company has the principal business objective of providing sales and marketing consulting services to small to medium sized Chinese tea producing companies who wish to export and distribute high quality Chinese tea products worldwide. The Company commenced business activities in August, 2008, when it entered into a related party Sales and Marketing Agreement with Yunnan Zhongsen Group, Ltd (YZG) (a/k/a Yunnan Zhongsen Commercial Forest Plantation Group Inc., a/k/a Yunnan Zhongsen Forest Co., Ltd.), a company located in Kunming, China, to provide sales and marketing consulting services for YZG’s tea and tea related business lines.




Functional Currency





We reviewed the requirements as set forth in FASB ASC 830-10-55-4, "in those instances in which the indicators are mixed and the functional currency is not obvious, management's judgment will be required to determine the functional currency that most faithfully portrays the economic results of the entity's operations and thereby best achieves the objectives of foreign currency translation set forth in paragraph 830-10-10-2."  Paragraph 830-10-10-2 provides that the foreign currency translation must accurately reflect the reporting company's cash flows and equity when applying a rate change.   Both our functional and reporting currency is US Dollars. The Company uses the US Dollar as this is the economic environment of its operations. The Company maintains its bank account in US Dollars, pays invoices in US Dollars, and most agreements require the amounts to be settled in US Dollars. We therefore feel that the US Dollar is our functional currency.





Use of Estimates:




The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those results.





Revenue Recognition





The Company recognizes revenue from marketing arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”. In all cases, revenue is recognized at the time the commissions or fees have been earned, which is upon the completion of the sale and when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.




Cash and Cash Equivalents, and Credit Risk:


For purposes of reporting cash flows, the Company considers all cash accounts with maturities of 90 days or less and which are not subject to withdrawal restrictions or penalties, as cash and cash equivalents in the accompanying balance sheet.




The Company maintains a portion of its deposits in a financial institution that insures its deposits with the FDIC insurance up to $250,000 per depositor and deposits in excess of such insured amounts represent a credit risk to the Company. At February 28, 2011 and May 31, 2010 the Company had $0 in cash that was uninsured.





6




Accounts Receivable




The Company is required to estimate the collectability of its accounts receivable. The Company's reserve for doubtful accounts is estimated by management based on a review of historic losses and the age of existing receivables from specific customers. As of February 28, 2011 and May 31, 2010, the Company recorded a reserve for doubtful accounts of $0 and $0, respectively.





Concentration of Credit Risk





During the three and nine months ended February 28, 2011, and 2010 one related party customer located in China accounted for 100% of the Company's sales and 100% of accounts receivable as of February 28, 2011 and May 31, 2010.





Stock Compensation





The Company follows FASB Accounting Standards Codification No. 718 – Compensation – Stock Compensation for share based payments to employees.  The Company follows FASB Accounting Standards Codification No. 505 for share based payments to Non-Employees





Segments





The Company operates in one segment and therefore segment information is not presented.  100% of our sales revenue is derived from a company located in China and 100% of our accounts receivable balances are from the same customer located in china. Please refer to the above “Concentration of Credit Risk”.




Fair Value of Financial Instruments





The carrying amounts of the Company’s financial instruments including accounts receivable and accounts payable approximate fair value due to the relatively short period to maturity for these instruments.





Evaluation of Intangible Asset for Impairment




On a quarterly basis, management reviews its current and expected future cash flow derived from its intangible assets and determines if any impairment exists and if there is a need to record an impairment. We will update our future filings to include our accounting policy for evaluating intangible assets for impairment.




The Company has capitalized the value of the Sales and Marketing agreement. The Management determined upon review of current and expected future cashflow derived from the Sales and Marketing Agreement that the value of the Agreement had been impaired. As of May 31, 2009 the Company has recorded an impairment on the agreement in the amount of $379,000. The Company issued 5,000,000 shares of common stock valued at $50,000 or $.01 per share as the finder’s fee. The Company expensed the value of the common stock issued at August 31, 2008.




The Company evaluates the recoverability of the sales and marketing agreement annually and whenever events or circumstance make it more likely than not that impairment may have occurred. Several factors are used to evaluate the intangible asset, including management’s plans for future operations and recent operating results. In the event facts and circumstances indicate the carrying value of the license agreement is impaired, the license agreements carrying value will be reduced to its implied fair value through a charge to operating expenses.




Earnings Per Share:




Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC No. 260, “Earnings Per Share.”  As of February 28, 2011 and 2010, there were no common share equivalents outstanding.





Income Taxes:





The Company accounts for income taxes under the FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates (37.63%) expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.




7




Recent Accounting Pronouncements:





In October 2009, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2009-13, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. The ASU significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. The ASU will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company does not expect the adoption of ASU No. 2009-13 to have any effect on its financial statements upon its required adoption on June 1, 2011.





NOTE 2 - SALES AND MARKETING AGREEMENT WITH RELATED PARTY





On August 29, 2008 the Company entered into a related party Sales and Marketing Agreement (the “Agreement”) with the Yunnan Zhongsen Group, Ltd. (formerly known as Yunnan Zhongsen Forest Co., Ltd. (a/k/a Yunnan Zhongsen Commercial Forest Plantation Group Inc) on or before September 1, 2008), or YZG, a Chinese company located in Kunming, Yunnan Province, People’s Republic of China, which caused them to become YZG’s exclusive sales and marketing agent worldwide. The Company receives a commission of 20% of global sales, payable each month based on the Company’s and YZG’s sales figures. The Agreement is for a fifty year term, commencing on the Closing Date and ending on August 29, 2058 (the “Initial Term”). The Initial Term shall be automatically extended for additional terms of successive fifty year periods (the “Additional Term”) unless the Parties give written notice to the other of the termination of the Agreement hereunder at least 180 days prior to the expiration of the Initial Term or Additional Term. Under the Agreement, the Company shall provide sales, marketing and finance services to YZG  as the exclusive worldwide sales agent, and shall identify customers throughout the entire world for YZG products and services. The Company shall further, within such limitations relating to price, delivery and other key terms as YZG may, from time to time specify in writing, and subject to acceptance by YZG (by telex or otherwise), negotiate sales contracts as YZG’s exclusive worldwide sales agent, inside and outside of China.




On August 29, 2008, the effective date of the transaction, the Company issued 49,900,000 shares of common stock valued at $499,000 or $.01 per share the most recent cash offering price in exchange for the sales and marketing agreement to 4.200 YZG shareholders, who were, at the time, made up of shareholders, officers and directors, friends and family, and suppliers and customers of YZG. Prior to the transaction, there were no common shareholders, officers, directors or other related parties or transactions between the Company and YZG. The Company determined the fair value of the equity exchanged was the more reliable measurement of the assets acquired. ASC 805-50-25-1 requires the equity issued to be recognized on the date of the acquisition. At the time the company entered into the marketing agreement, we had recently completed a private placement of stock for cash. Based on the current cash offering price, it was determined that this was the fair value of the stock and this value was used to value the transaction.




In August 2010, the 5 current shareholders of YZG, acquired all of the outstanding shares of YZG from the previous 4,200 shareholders, among which selling shareholders was Ms. Wang..  In connection with their acquisition of the YZG shares, the former officers and directors of YZG, including Zhou Zhongping, Zou Jun and Pin Nie, resigned from their positions in YZG effective August 2010.  On August 29, 2008, Ms. Wang owned 13.61% of YZG, which was subsequently sold to the 5 current shareholders in August 2010 in an undisclosed ratio.  Currently, none of our officers and directors is related to the owners of YZG.




The Company determined the fair value of the equity exchanged was the more reliable measurement of the assets acquired. ASC 805-50-25-1 requires the equity issued to be recognized on the date of the acquisition. At the time the company entered into the marketing agreement, we had recently completed a private placement of stock for cash. Based on the current cash offering price, it was determined that this was the fair value of the stock and this value was used to value the transaction.




8




We are not under common ownership or management as YZG with the exception that our President and Chairman, Wang Li, currently serves as a director on the Board of Directors of YZG.  The following tables set forth our current Officers and Directors and the Officers, Directors and ownership interests of YZG.




Name
Director of ZSIT
ZSIT Officer/Title
Director of YZG
YZG Officer/Title
Ownership Interest in YZGLi Wang
X
President/Secretary
XZhou Zhongping
XZou Jun
XPin Nie
X
CEO, COOBinquan Zhang
X
CFOKaibiao Yin


X
PresidentDelinFeng


X
Executive VPRuigang Su


X
Administrative VPFeiZou


X
VP of SalesBaosheng Wang


XJinquan Ma


XFei Wang




40%Xiaochuan Wang




30%Jinfei Zhang




20%Guisheng Wang




5%Tenggao Liu




5%





NOTE 3 – OTHER RELATED PARTY TRANSACTIONS




During the three and nine months ended February 28, 2011 and 2010 the Company recorded imputed compensation of $500, $500, $1,500 and $1,500, respectively, for the services contributed by its President and its CFO (See Note 5)





On December 31, 2008, our President converted a note payable in the amount of $100,000 and accrued interest of $499 into 100,000 common shares at a purchase price of $1.00499 per common share. The shares were issued in reliance on the exemption under Section 4(2) of the Securities Act of 1933, as amended.




NOTE 4 – CONSULTING AGREEMENTS





On September 1, 2008 the Company entered into an agreement with EverAsia Financial Consultant Co., Ltd whereby the Company will pay to EverAsia Financial Consultant Co., Ltd $5,000 per month beginning September 1, 2008 and ending December 31, 2009 for consulting services. On December 31, 2009, the contract was extended until December 31, 2011. During the three and nine months ended February 28, 2011 and 2010, the Company recorded an expense of $15,000, $15,000, $45,000 and $45,000, respectively.  EverAsia Financial Consultant Co., Ltd provides consulting services as they pertain to complying with business practices in the US as they differ from Chinese business practices, advisory services with regard to business expansion, regulatory compliance, general bookkeeping services, registered agent services, mail, phone and office hosting





On September 1, 2008 the Company entered into an agreement with EverAsia Financial Group, Inc. whereby the Company will pay to EverAsia Financial Group, Inc. $5,000 per month beginning September 1, 2008 and ending December 31, 2009 for management services. On December 31, 2009, the contract was extended until December 31, 2011. During the three and nine months ended February 28, 2011 and 2010, the Company recorded an expense of $15,000, $15,000, $45,000 and $45,000, respectively.   EverAsia Financial Group, Inc. provides consulting services as they pertain to complying with business practices in the US as they differ from Chinese business practices, advisory services with regard to business expansion, regulatory compliance, general bookkeeping services, registered agent services, mail, phone and office hosting





EverAsia Consultant Co., Ltd provides consulting services as they pertain to complying with business practices in the US as they differ from Chinese business practices, advisory services with regard to business expansion, regulatory compliance, general bookkeeping services, registered agent services, mail, phone and office hosting.





NOTE 5 - STOCKHOLDERS' EQUITY





During the three and nine months ended February 28, 2011 and 2010 the Company recorded imputed compensation of $500, $500, $1,500 and $1,500, respectively, for the services contributed by its President and its CFO (See Note 3).





NOTE 6 - GOING CONCERN





The Company's unaudited condensed financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. For the nine months ended February 28, 2011, the Company has a net loss of $25,856, used cash in operations of $1,166, and has an accumulated deficit of $573,619 as of February 28, 2011. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management continues to actively seek additional sources of capital to fund current and future operations. There is no assurance that the Company will be successful in continuing to raise additional capital and establish its business model. These financial statements do not include any adjustments that might result from the outcome of these uncertainties.




9




Item 2.     Management’s Discussion and Analysis of Financial Condition and Results of Operation





The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.





BUSINESS OVERVIEW





Zhong Sen International Tea Company was incorporated on January 30, 2008, in the State of Florida. Our principal business objective is to  provide sales and marketing consulting services to small to medium sized Chinese tea producing companies who wish to export and distribute high quality Chinese tea products worldwide. We commenced business activities in August, 2008, when we entered into a related party Sales and Marketing Agreement with Yunnan Zhongsen Group, Ltd (YZG) (a/k/a Yunnan Zhongsen Commercial Forest Plantation Group Inc.), a related party company located in Kunming, China, to provide sales and marketing consulting services for YZG’s tea and tea related business lines.  During the year ended May 31, 2009, we exited the development stage.





RESULTS OF OPERATION





Comparison of Results of Operations for the Three Months Ended February 28, 2011 Compared to the Three Months ended February 28, 2010.





Total Revenues





We had revenues of $35,159 for the three months ended February 28, 2011 and $38,957 for the three months ended February 28, 2010.  We receive 20% of YZG’s sales through the related party sales and marketing agreement we signed with YZG in August, 2008.  The decrease of $3,798 can be attributed to a decrease in sales of tea and tea products by our main customer, YZG, due to a weakened global economy.





Operating Expenses





Operating expenses for three months ended February 28, 2011 were $54,754 as compared to $35,402 for the three months ended February 28, 2010.  During the comparable period ending February 28, 2011, we incurred lower professional fees, and higher general and administrative expenses.  Specifically, we incurred higher general and administrative expenses as a result of our application with FINRA for a trading symbol on the OTCBB.





Loss from operations





Loss from operations for the three months ended February 28, 2011 totaled $19,595 compared to a profit of $3,555 for the three months ended February 28, 2010.  The increase in loss is directly attributable to the increase in operating expenses during the same period in 2011.





Net Loss





Net loss was $19,595 for the three months ended February 28, 2011, compared to a net profit of $3,555 for the three months ended February 28, 2010. The decrease in net income is directly attributable to the increase in operating expenses during the same period in 2011 as related to our application to FINRA for a trading symbol on the OTCBB.





Comparison of Results of Operations for the Nine Months Ended February 28, 2011 Compared to the Nine Months ended February 28, 2010.





Total Revenues





We had revenues of $105,402 for the nine months ended February 28, 2011 and $111,443 for the nine months ended February 28, 2010.  We receive 20% of YZG’s sales through the related party Sales and Marketing Agreement we signed with YZG in August, 2008.  The decrease of $6,041 can be attributed to a decrease in sales of tea and tea products by our main customer, YZG, due to a weakened global economy.





Operating Expenses





Operating expenses for the nine months ended February 28, 2011 were $131,258 as compared to $113,555 for the nine months ended February 28, 2010.  During the comparable period ending February 28, 2011, we incurred lower professional fees, and general and administrative expenses were higher as they relate to our application to FINRA for a trading symbol on the OTCBB.





10




Loss from operations





Loss from operations for the nine months ended February 28, 2011 totaled $25,856 compared to a loss of $2,112 for the nine months ended February 28, 2010.   The increase in loss is directly attributable to the decrease in revenue and increase in operating expenses during the same period in 2011.





Net Loss





Net loss was $25,856 for the nine months ended February 28, 2011, compared to a net loss of $2,112 for the nine months ended February 28, 2010. The increase in loss is directly attributable to the decrease in revenue and increase in operating expenses during the same period in 2011.





PLAN OF OPERATIONS





Our plan of operations for the next twelve months is focused on the following primary objectives.





1.
Find additional customers to purchase tea products from our contracted supplier, Yunnan Zhongsen Group, Ltd. and;2.
Raising capital through private debt or equity offerings.





Subject to the requisite financing, we believe that we can complete the following objectives within the time period specified:





Supply Agreements





In August 2008, we entered into a related party agreement with Yunnan Zhongsen Group, Ltd., or YZG (a/k/a Yunnan Zhongsen Commercial Forest Plantation Group Inc.), a Chinese company located in Kunming, Yunnan Province, People’s Republic of China, which caused us to become YZG’s exclusive sales and marketing agent worldwide.  We receive a commission of 20% of global sales, payable each month based on our and YZG’s sales figures.  On August 29, 2008, the effective date of the transaction, we issued 49,900,000 shares to approximately 4,200 shareholders in exchange for the sales and marketing agreement.  The shares were issued to former officers and directors, friends and family, and suppliers and customers of YZG. Under the Agreement, the issuance was made under the Regulation S exemption and all of the above shareholders are non-U.S. persons. The issuance did not engage in any directed selling efforts in the U.S.  Additionally, our former sole director and officer named a new board of directors, and hired new executive officers, and resigned his positions at the company.





Sales and Marketing





All sales are generated by external sales and marketing representatives, including those at our related party main supplier, YZG. The product is positioned as a high-end luxury product.  The 3,000 year history of this limited production, highly prized product will be essential in positioning the product and in differentiating this product from the current American and European viewpoint of commercially produced tea, as well as setting it apart from much of the tea products offered throughout Asia.   The history, culture and ritual surrounding the production of the tea leaf and the ritual of the service and presentation of this luxury item will be exploited and are critical to the positioning of the product.





Our company suggests both direct sales and indirect sales through channel marketing to our client as the methods of getting the product to the worldwide consumer.   Direct sales can occur in person, via the phone, the Internet or by mail. Indirect, or channel sales typically refers to sales through a reseller. A reseller can order from us directly, or from a wholesale distributor.  In any case, our compensation is directly affected by our client’s sales volume.





We suggest to our client, YZG, that they can minimize channel conflicts by employing one or more of the following strategies:





▪      Segmentation of the product line;





▪      Establishment of limited or exclusive territories;





▪      Design price differentiation from direct sales and channels sales providing a cost incentive for the consumer to purchase from the reseller;





▪      Establishment of rotating promotions for resellers; and/or





▪      Design a tiered system that would establish reseller levels rewarding higher volume resellers with improved margins.





11




Based on our recommendations, they will establish and manage their channel marketing program worldwide by establishing a competitive reseller program, recruiting resellers, preparing proper reseller collateral, creating reseller kits, managing the reseller database using Partner Relationship Management (PRM) software, ensuring proper merchandising, ensuring adequate stocking levels, providing reseller education and managing seeding programs.  The channel program allows this company to produce a large volume of sales utilizing its existing human resources as, we will have the ability to manage resellers and thereby multiply our resources.  Direct sales can be managed mostly by technology through applications available through the Internet, such as, on-line stores with credit card processing portals to accumulate sales orders from direct sales.  The proper implementation of these programs effectively eliminates the need for the hiring of additional staff for a significant period of time by the use of technology and the multiplication of resources by contracting with distributors or other resellers.





Revenue Model





Our revenue model contemplates a single form of revenue, but from multiple sources.  We anticipate earning our revenue based on the success of our sales and marketing efforts provided to the tea producer.  We will earn a percentage of sales directly related to our efforts.  Since we will be processing the sales for our client, we will have a direct and firsthand knowledge of the effectiveness of our efforts.





Employees





As of February 28, 2011, we have 2 part-time employees.





GOING CONCERN CONSIDERATION





As reflected in the accompanying unaudited condensed financial statements, we have an accumulated deficit of $573,619 as of February 28, 2011 and used cash in operations of $1,166 during the nine months ended February 28, 2011. This raises substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital and implement our business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.





We believe that actions presently being taken to obtain additional funding and implement our strategic plans provide the opportunity for us to continue as a going concern.





LIQUIDITY AND CAPITAL RESOURCES





As of February 28, 2011, we have assets of $184,905 consisting of cash of $265, accounts receivable of $64,640 and intangible assets of $120,000 and total liabilities of $65,330 consisting of accounts payable of $65,330.  Compared to May 31, 2010 we had assets of $149,731 consisting of cash of $1,431, accounts receivable of $28,300 and total liabilities of $5,800 consisting of accounts payable of $5,800.  As of February 28, 2011, we have experienced an increase in the time it takes us to collect on our Accounts Receivable.  Further increases in the time to collect our Accounts Receivable will negatively affect our liquidity, as well as cause us to establish a reserve for bad debts.  We are in contact with our debtors, and are attempting to shorten the time necessary to collect.





Cash and cash equivalents from inception to date have been sufficient to cover expenses involved in starting our business. Current cash on hand is insufficient to support our operations for the next twelve months. Therefore, we will require additional funds to continue to implement and expand our business plan during the next twelve months.





CRITICAL ACCOUNTING PRONOUNCEMENTS





Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.





Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our results of operations, financial position or liquidity for the periods presented in this report.




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Revenue Recognition





The Company recognizes revenue from marketing arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized at the time the commissions or fees have been earned, which is upon the completion of the sale and when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.





RECENT ACCOUNTING PRONOUNCEMENTS





In October 2009, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standard Update (“ASU”) No. 2009-13, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit and modifies the manner in which the transaction consideration is allocated across the separately identified deliverables. The ASU significantly expands the disclosure requirements for multiple-deliverable revenue arrangements. The ASU will be effective for the first annual reporting period beginning on or after June 15, 2010, and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. Early adoption is permitted, provided that the guidance is retroactively applied to the beginning of the year of adoption. The Company does not expect the adoption of ASU No. 2009-13 to have any effect on its financial statements upon its required adoption on June 1, 2011.





OFF-BALANCE SHEET ARRANGEMENTS





We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).





Item 3.    Quantitative and Qualitative Disclosures about Market Risks





Not applicable because we are a smaller reporting company.





Item 4T.  Controls and Procedures





Evaluation of Disclosure Controls and Procedures





Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure as a result of continuing material weaknesses in its internal control over financial reporting.




As disclosed in the Company’s Annual Report on Form 10-K for the year ended May 31, 2010, during the assessment of the effectiveness of internal control over financial reporting as of May 31, 2010, our management identified material weaknesses related to the lack of requisite U.S. generally accepted accounting principles (GAAP) expertise of our Chief Financial Officer and our internal bookkeeper.  This lack of expertise to prepare our financial statements in accordance with U.S. GAAP without the assistance of the outside accounting consultant hired to ensure that our financial statements are prepared in accordance with U.S. GAAP constitutes a material weakness in our internal control over financial reporting. In order to mitigate the material weakness, we engaged an outside accounting consulting to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity to U.S. GAAP.  This outside accounting consultant is a certified public accountant in the U.S. and has significant experience in the preparation of financial statements in conformity with U.S. GAAP.  We believe that the engagement of this consultant will lessen the possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis, and we will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate. We expect to continue to rely on this outside consulting arrangement to supplement our internal accounting staff for the foreseeable future.  Until such time as we hire the proper internal accounting staff with the requisite U.S. GAAP experience, however, it is unlikely we will be able to remediate the material weakness in our internal control over financial reporting.




Changes in Internal Controls




There have been no changes in the Company's internal control over financial reporting during the latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.




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PART II - OTHER INFORMATION





Item 1. Legal Proceedings.





Currently we are not aware of any litigation pending or threatened by or against the Company.





Item 1A. Risk Factors





Not applicable because we are a smaller reporting company.





Item 2. Unregistered Sales of Equity Securities and Use of Proceeds





None





Item 3. Defaults Upon Senior Securities.





None.





Item 4. Removed and Reserved





Item 5. Other Information.





None





Item 6. Exhibits and Reports of Form 8-K.





(a)      Exhibits





31.1
Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes Oxley Act of 200231.2
Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 200232.1
Certification of Chief Executive Officer pursuant to Section 1350 of Sarbanes Oxley Act of 200232.2
Certification of Chief Financial Officer pursuant to Section 1350 of Sarbanes Oxley Act of 2002





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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





ZHONG SEN INTERNATIONAL TEA COMPANYDate: May 23, 2011
By:
/s/  Li WangLi WangChief Executive OfficerBy:
/s/  Binquan ZhangBinquan ZhangChief Financial Officer